
Concept explainers
Future value: A nominal value of an asset or investment at a specific period with an assumed interest rate is termed future value. Future value can be computed by multiplying the amount invested at the present with the future value factor.
Given scenario: Person CW will retire on his 55th birthday and therefore he creates a fund that will give him 8% returns. He wants to withdraw $20,000 per year from June 30, 2021 till 2024. Therefore, Person CW wants to invest equally on June 30 from 2017 to 2020.
(a)
To determine the balance of the fund required to achieve the given objective.
(b)
To determine the amount contributed by Person CW each year.
From the interest table (future value of an ordinary annuity), it is found that 4.50611 is the value of 4 periods and 8% interest rate.

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Chapter 6 Solutions
Study Guide Intermediate Accounting, Volume 1: Chapters 1 - 14
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